Prime Stocks performance review 2025

2025 will not go down as the year Indian investors made easy money in equities, even as the yellow and silver metals outshone. This year the market reminded everyone that compounding comes with character tests baked in. The headline Nifty 50 return of 9.68% (as of December 26, 2025) looks perfectly respectable on paper, but it hides the wild swings in personal portfolios. 

The year that looked easy…until it wasn’t

A deep correction that began in September 2024 dragged on till February 2025, shaving off nearly 4,000 points from the Nifty – about 15% from the peak – just when consensus narratives of “India decade” were beginning to wear thin. As investors slowly started making peace with lower returns, there came US tariff worries, policy surprises and a sharp sectoral divergence where a handful of themes partied, while most of the broader market watched from the sidelines.​

Mid and small-caps the heroes of the previous bull run, discovered gravity the hard way. The Nifty Midcap 150 barely managed a 4.96% gain, while the Smallcap 250 spent most of the year oscillating between “flat” and “fatigue”. This vindicated our cautious stance on froth down the market-cap table in our Equity Outlook for 2025. 

Markets staged a recovery during the latter part of the year on tariff resolution hopes and improved global equity sentiment. But gains were largely restricted to select sectors like financials, auto, and metals. Broader market sentiment remained subdued throughout. That only 25% of the NSE listed universe delivered positive returns this calendar reinforces the lack of animal spirits. 

Against this backdrop, our job in 2025 was less about looking for the next hot theme and more about doing the boring things well – sticking to quality businesses, respecting valuations, booking profits when the market got euphoric, and staying underweight in pockets where narrative had clearly run ahead of numbers. 

Our learnings? It was not a year that rewarded heroics. It was a year that gave gentle approval to discipline, process, and a focus on containing downside risk. On this front, we also got a little help from an unexpected GST cut that turned some of our auto ideas from “good” into “you’ll want to screenshot this.”​

The Year Gone By

The mid-cap and small-cap indices bore the brunt of the correction, with the Nifty Midcap 150 delivering 4.96%, while the Nifty Smallcap 250 struggled. This vindicated our cautious stance on the mid and small-cap segments that we had articulated in our 2025 equity outlook.

Favourable factors that supported markets:

1. Income tax cuts and interest rate reductions
2. RBI relaxing lending curbs on banks/NBFCs 
3. Unexpected GST cut (a game-changer for auto stocks)
4. Resilient domestic flows

Adverse factors that weighed on markets:

1. Muted earnings growth – Despite mild recovery, FY26 earnings growth remained in high single digits out of sync with valuations
2. Persistent FPI outflows and currency depreciation
3. Relentless supply of paper from IPOs, offers for sale and promoter selling
4. India’s limited participation in the global AI story
5. Sectoral earnings disappointments, particularly in consumption and capex-linked sectors

Our key predictions from the 2025 outlook

In our 2025 Equity Outlook published in January, we had anticipated that returns would be back-ended, with the first half likely to see continued correction before a potential recovery in H2. We also expected earnings growth at the broader market level to slow sharply in FY26, aligning more closely with nominal GDP growth in the 9-10% range.

 Back-ended returns: This played out exactly as anticipated. The Nifty 50 chart shows markets bottomed in February-March 2025 before staging a recovery from April onwards, with the strongest gains coming only in October-November.

Caution on mid and small-caps: We had warned that the Mid-cap 150 was the riskier pocket, having accommodated stocks from overheated sectors. The Midcap 150’s mere 4.96% return and the Smallcap 250’s struggles validated our conservative stance.

Sector focus on value-meets-growth: Our emphasis on stocks in the broader financial space, select  IT, auto and select consumer stocks paid off handsomely.

Given this backdrop, our strategy in 2025 was centered on three pillars:

1. Quality over quantity: We focused primarily on large companies. The average market cap of the buy calls we gave in 2025 was Rs 1,15,000 crore with only 2 smallcap  buys – Lumax Industries and Sheela Foam – reflecting our commitment to quality and risk management.
2. Active profit booking: We continued our practice of issuing ‘book profit’ calls on stocks that had delivered outsized returns in short periods or where sectoral tailwinds were showing signs of peaking.
3. Bottom-up stock selection: With very few sectors offering attractive valuations, we adopted a rigorous stock-specific approach rather than broad sectoral bets.

What follows is a candid look at how this approach translated into outcomes – where our calls differentiated meaningfully from the broader market, where they did not, and what the hits and misses of 2025 are teaching us as we step into 2026.

Our stock recommendations significantly outperformed the broader market:

• 48% of our calls (13 out of 27) delivered outperformance averaging 21.4 percentage points above the Nifty 50
• Nearly 63% of our calls generated positive returns
• Stocks that delivered positive returns gave an average 23.74% 

Context: How We Fared vs. the NSE Universe

To put our performance in perspective, let’s compare our success rate with the broader NSE universe:

Key Insight: In a market where 81% of stocks underperformed the Nifty 50 and 75% delivered negative returns, our 48% outperformance rate and 63% positive returns rate demonstrate the value of active, research-driven stock selection in challenging markets. We are not claiming great success here. We have managed to remain afloat when compared with the market. 

Our Hits and Misses

Hits

2025 rewarded our strategic bets on quality stocks in sectors with clear structural tailwinds. Here are our standout performers:

Auto sector dominance: The clustering of auto names among our top performers wasn’t by design—it was a combination of bottom-up stock selection and fortune. While Lumax emerged from our earnings breakout screening, stocks like Eicher and Hyundai came on our radar at different points for growth and valuation reasons. The unexpected GST cut acted as a powerful catalyst, turning good stock picks into great performers.

Other Notable Outperformers

• Shaily Engineering Plastics: This specialised high precision moulded plastics play delivered 24% outperformance
• Mahindra & Mahindra Financial Services: Strong recovery in rural lending drove 23.7% outperformance
• Persistent Systems: A niche IT story with strong earnings and a 18.82% outperformance
• Timken India: Industrial play benefiting from manufacturing upturn (15.34% outperformance)
• Sundaram Finance: Quality NBFC pick with 12.21% outperformance

Other stocks like Escorts Kubota, United Spirits, Bajaj Auto and Sundaram Finance stayed positive with mild single digit outperformance. Nippon India ETF Hang Seng BeES, our China recovery bet also delivered marginal outperformance and continues in our BUY list. 

Sectoral insights from our winners

1. Financials delivered as expected: Our 2025 outlook had identified financials as a key sector where “value meets growth.” Despite near-term margin pressures, the sector’s sharp underperformance in 2024 offered room for upside. Mahindra Financial and Sundaram Finance validated this thesis. Besides, picks like HDFC AMC from earlier years, continued to provide strong support even as our ‘invest’ call on ICICI Pru AMC IPO recently, delivered well. 
2. Auto’s unexpected windfall: The GST cut turned our counter-cyclical automobile bets into stellar performers. This demonstrates how policy tailwinds can amplify the returns from fundamentally sound stock selection.
3. Selective IT recovery: Our focus on niche IT names like Persistent Systems paid off

Book Profit Calls – Realizing Gains in a Volatile Market

One of the hallmarks of our 2025 strategy was aggressive profit booking. We believe in realizing gains when stocks deliver exceptional returns in short periods, freeing up capital for redeployment into fresh opportunities.

These calls exemplify our philosophy: lock in exceptional gains rather than hoping for the last rupee. Bajaj Holdings, in particular, was a multi-year holding that delivered extraordinary wealth creation—a 258.87% return over four years from our original 2021 call.

Misses

No year is complete without acknowledging the calls that didn’t work out as planned:

Key Underperformers

1. Sheela Foam: It was our biggest miss with a negative 35.30% absolute return. While we had anticipated challenges from industry disruption and the Kurl-on acquisition, the delivery of financial outcomes fell far short of expectations. 
2. HAL, ABB, Schaeffler India, Supreme Industries, Glaxosmithkline Pharmaceuticals, Elgi Equipment: These stocks delivered –7% to -15% negative returns. However, we have been tracking their results closely and there is no material fundamental deterioration to report or get concerned about at this point. We think they’ve been hurt primarily by market sentiment and sector rotation. We would comfortably hold them as such stocks can typically benefit in a new leg of rally. 
3. Underperformers from previous years: PVR Inox, RHI Magnesita, NTPC Green Energy, and Orient Electric are under continuous monitoring for potential action.

Takeaways from 2025

1. Our market outlook was accurate: We correctly anticipated back-ended returns, earnings slowdown, and heightened risks in mid/small-caps.
2. Quality and conviction matter: Focusing on larger, quality names with large-cap orientation helped navigate volatility.
3. Profit booking is a discipline, not a luxury: Our aggressive book profit calls realized substantial gains and freed capital for redeployment.
4. Luck favours the prepared: The GST cut was unexpected, but it amplified returns on our contrarian auto picks. But we could still have sailed the finance boat with more NBFCs (such as gold loan companies) that we missed as a result of our caution with gold prices. 
5. Patience is essential, but vigilance is critical: Some stocks need time; others need exits. Knowing the difference is key.

As we prepare our comprehensive market outlook for 2026, our commitment remains unwavering: identifying quality opportunities for long-term wealth creation. We encourage you to stay closely engaged with our stock updates to remain informed about meaningful market developments.

We close this year with deep gratitude for your continued trust and patience. In the ever-changing world of investments, patience combined with rigorous research is often rewarded handsomely—a principle that held true once again in 2025.

Here’s to a prosperous 2026! May your investment journey continue to be rewarding.

The above report is a performance summary of our calls. These are not advisory in nature. Please visit Prime Stocks to pick stocks that suit your requirements and risk appetite.

Disclosures and Disclaimers

The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (hereinafter referred to as the Regulations).

1. PrimeInvestor Financial Research Pvt Ltd is a SEBI-Registered Research Analyst having SEBI registration number INH200008653. PrimeInvestor Financial Research Pvt Ltd, the research entity, is engaged in providing research services and information on personal financial products. This Research Report (called Report) is prepared and distributed by PrimeInvestor Financial Research Pvt Ltd with brand name PrimeInvestor.

2. PrimeInvestor Financial Research Pvt Ltd, its partners, employees, directors or agents, do not have any material adverse disciplinary history as on the date of publication of this report. 

3.  PrimeInvestor Financial Research Pvt Ltd has not received any compensation from the subject companies in the past twelve months. PrimeInvestor Financial Research Pvt Ltd has not been engaged in market making activity for the subject companies.

4. In the last 12-month period ending on the last day of the month immediately preceding the date of publication of this research report, PrimeInvestor Financial Research Pvt Ltd has not received compensation or other benefits from the subject companies of this research report or any other third-party in connection with this report.

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